deposit

I did not protect tenants deposit; how can I defend tenants claim for compensation?

Defending a tenant’s deposit claim for compensation, when a landlord did not protect the deposit or protected it late.

One of the frequent questions, members ask is relating to defending a tenant claim, for non-compliance of the deposit legislation.

If a landlord breaches the deposit legislation, then it is a case of limiting compensation quantum to the tenant?

What does the Tenant Deposit Scheme (TDS) law say?

Landlords must protect the deposit with an authorised government scheme, within 30 days of receiving the tenant’s deposit.

If a tenant deposit was received between 6 April 2007 and 5 April, 2012 landlords were required to protect the tenant deposit within 14 days of receipt. From 6 April 2012, the period was extended to 30 days as it is currently. It is also now law, for those landlords who received a deposit before 6 April 2007, then the landlord must protect the deposit by 24 June 2015.

 I did not protect the tenant’s deposit, can I still serve a section 21 notice

No, if the deposit was not protected, then you will not be able to serve a section 21 notice. Under the deposit legislation, you must protect the deposit within 30 days of taking it. You must give the tenant the deposit prescribed information too within 30 days.

Although it is not a legal requirement to get the tenant to sign and date the deposit certificate and the prescribed information, it is wise to get both signed and dated to avoid contention. 

I need to evict my tenant, but I did not protect the deposit, what can I do?

If you failed to protect the tenant’s deposit and need vacant possession of your property, you have a few options:

You can consider seeking possession under section 8 if you have rent arrears. You will need rent arrears of 2 months, and in addition, you will need rent arrears which equates to 3 times the value of the deposit, just in case the tenant makes a counterclaim for the non-protection of the deposit.

You will need to ensure the tenancy has had no disrepairs which the tenant may try to counterclaim against.

If the section 8 route is not possible or too risky due to the level of rent arrears or due to disrepair, then you need to consider section 21 route.

To use section 21 route, you will need to return the deposit money back to the tenant. If the tenant has rent arrears, then obtain tenants instructions in writing to use the deposit held towards the rent arrears. Once you have this, or you have returned the deposit monies to the tenant, then you can serve a section 21 notice. 

When serving a section 21 notice, ensure you have fully complied with all your obligations as a landlord. Some other non-compliance on your part could also make the section 21 notice invalid. You can check our section 21 checklist here to see if you have no further issue’s that need to be dealt with before serving a section 21 notice.

I didn’t protect the deposit, my tenant does not know, should I tell the tenant?

No, do not open a can of worms, if the tenant does not know, say nothing. By not protecting the deposit, or protecting it in time, the breach nevertheless has been committed—no benefit in saying anything to the tenant. 

It can be a problem if from the tenant’s point of view the landlord is being unreasonable, making deductions upon the tenant ending their tenancy. At this point, if the tenant seeks advice, they may realise the deposit breach committed by the landlord. 

How much compensation will I have to pay for not protecting the deposit?

Good question, many tenants, think that they will be awarded three times the value of the deposit, in addition, the deposit back. The law says “up to” 3 times the value of the deposit. The keyword is “up to” 3 times, which does not mean, that the tenant will automatically receive three times the value of the deposit. It is rare; a court will award the full three times value of the deposit to a tenant.

If a landlord has failed to protect the deposit in time, and the tenant or someone acting for the tenant, has contacted the landlord, then the landlord should:

  1. Ask the tenant or their representative to put the request in writing.
  2. IMPORTANT; If a tenant is claiming compensation, then the landlord can counterclaim for any rent arrears or damage to the let property. The landlord can also claim the cost of any notices, that may have served on the tenant.
  3. The landlord should respond swiftly, to the tenant’s request, for the alleged deposit breach.
  4. Should the tenant wish to proceed to claim against the landlord, then the tenant should be put on notice, landlord’s intent to counterclaim.
  5. If you have nothing to counterclaim against the tenant than consider offering the tenant one times the value of the deposit and return of the tenant’s deposit.
  6. If you are a new landlord or a landlord that has 1 or 2 properties, you should seek to reduce damages. It is reasonable to make a submission to the court that you are not a professional landlord, as such, the compensation should be one time the value of the deposit. There is a case history of supporting this. You did not willfully breach the TDS legislation; you probably were not aware of this legislation. It would be best if you were truthful to the court, as to the reasons why the deposit was not protected.

Where can I get help to deal with the claim against me?

Courts very rarely award the full time three times, the value of the tenant’s deposit, especially if you are not a professional landlord. You can seek expert advice and representation from Landlord Advice UK who have helped thousands of landlords against tenant deposit claims.

If you are a member of the BLA, should you require advice, you can contact the free helpline. If you are not a member, then join us, membership is free.

Source: British Landlords Association

Author: Amanda Goldsmith

Date: 27th of May 2020

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